On
October 25, 2006, the Company entered into an Exchange Agreement with
each of
John Cregan (“Cregan”), Frances Berger (“Berger”), and William M. Stern and his
affiliates identified below (collectively, the “Stern Affiliates”), each of
which provides for (a) the issuance of 7.4 shares of the Company’s common stock
in exchange for each share of the Company’s $3.25 Convertible Exchangeable Class
C Preferred Stock, Series 2 (the “Series 2 Preferred”) beneficially owned by
Cregan, Berger, and the Stern Affiliates, respectively, and (b) the waiver
by
each of Cregan, Berger, and the Stern Affiliates of all of their respective
rights to all accrued and unpaid dividends on the Series 2 Preferred.
Pursuant
to the terms of the Exchange Agreements, the Company will issue to (a)
Cregan
3,700 shares of common stock in exchange for 500 shares of Series 2 Preferred
owned by Cregan, and (b) Berger 9,990 shares of common stock in exchange
for
1,350 shares of Series 2 Preferred owned by Berger. The Exchange Agreements
further provide that the Company will issue an aggregate of 38,998 shares
of
common stock in exchange for 5,270 shares of Series 2 Preferred owned
by the
Stern Affiliates, as follows: William M. and Laurie Stern - 2,960 shares
of
common stock in exchange for 400 shares of Series 2 Preferred; William
M. Stern
Revocable Living Trust, UTD July 9, 1992 - 11,618 shares of common stock
in
exchange for 1,570 shares of Series 2 Preferred; the William M. Stern
IRA -
14,800 shares of common stock in exchange for 2,000 shares of Series
2
Preferred; and William M. Stern, Custodian for David Stern - 9,620 shares
of
common stock in exchange for 1,300 shares of Series 2 Preferred;
As
of
September 30, 2006, the accrued and unpaid dividend on the Series 2 Preferred
was $23.2625 per share. Accordingly, Cregan, Berger and the Stern Affiliates
waived an aggregate of approximately $165,629 in accrued and unpaid dividends
on
the shares of Series 2 Preferred to be surrendered to the Company in
accordance
with the Exchange Agreements. Each Exchange Agreement is subject to the
Company
listing the shares of common stock to be issued in connection with the
Exchange
Agreements on the AMEX.
Each
Exchange Agreement was solicited by and negotiated with each of Cregan,
Berger,
and the Stern Affiliates. Neither the Company nor any of Cregan, Berger,
or the
Stern Affiliates has paid or given, or agreed to pay or give, directly
or
indirectly, any commission or other remuneration for soliciting each
exchange.
The exchanges will be conducted under the exemption from registration
provided
by Section 3(a)(9) the Securities Act of 1933, as amended (the “Act”). The
Series 2 Preferred is registered with the Securities and Exchange Commission
under the Form S-2 Registration Statement No. 33-61640, effective May
19, 1993,
and, as such, the Company believes that the shares of common stock issued
pursuant to Section 3(a)(9) of the Act in exchange for the Series 2 Preferred
will be freely tradable by the recipient of the shares and will not be
considered restricted securities under Rule 144 of the Act.
Upon
completion of the foregoing exchanges and the similar exchanges previously
reported in the Company’s Form 8-K’s filed October 12 and 16, 2006, (a) 499,102
shares of Series 2 Preferred (excluding 18,300 treasury shares) will
remain
issued and outstanding and (b) there will a total of approximately $11.6
million
in accrued and unpaid dividends relating to such issued and outstanding
Series 2
Preferred. None of the accrued and unpaid dividends waived pursuant to
the
various Exchange Agreements or remaining on the outstanding shares of
Series 2
Preferred have been declared.
This
report is not an offer or a solicitation of an offer to sell or exchange
any
security.
Section 3
- Securities and Trading Markets